Should You Buy Cheap Rental Properties?
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Should You Buy Cheap Rental Properties?


– A question I’m often asked is, do you recommend buying cheap
houses as rental properties in the 30 to 70,000 price range? And my answer is yes. And in this video, I’ll
give you several reasons why buying cheap houses
where there’s a demand can be a great investment,
especially when you’re first starting out as a landlord. (upbeat music) Hi, I’m Andy Walker from monoperty.com and on this channel,
I share my experiences as a property investor and landlord. And also interview other investors so we can learn from their advice too. So if you’re new here, consider subscribing for
more videos like this. Now there’s a common misconception that the more expensive, a
more attractive a property, the more that can be charged for rent and the bigger return you’ll receive. And that’s simply not true. Cheap rental properties can
make very good investments. Now I’ve not bought a house in the 30 to 70,000 price
range yet, but I plan to. And in fact the cheapest
property I have bought has been my best performing property. It’s been a good, solid investment. It has never been vacant for
more than 3 weeks in a year. And that’s only happened once in the 14 years that I’ve owned it. And I’ve also seen some
nice capital growth in that time too. I remember when I first
viewed it I wasn’t that keen. But after listening to the letting agent about the demand in the area, I decided to go for it
and I’m so glad I did. By owning a cheap, single unit property, you’re still going to experience as a landlord and investor. Also, depending on your approach, you may decide to look for one that requires some cosmetic work
to bring it up to scratch. So you can add value before
your first tenant moves in. And so you’ll gain some experience
with renovations as well. Some people say that they’re not going to make a significant income
with a cheap rental property. And although that may be true when you compare it to a large HMO. You have to consider that
smaller, single-family properties will require less capital to get started, less time to get up and running,
and less time to be managed once a tenant is in situ. Typically, they’re less of a headache. I would also add that your rental yield is likely to be better
compared to buying a property in a city centre or a
more expensive region. I have a video on
calculating the rental yield and the return on investment up here which you should watch
if you’re not familiar with these terms. Property investing is
a long term business. And businesses are all about cash flow. If your goal is to replace your salary from your current job in the future, then buying several cheap properties will help you reach that goal, providing you stay focused
on the rental yield and cash flow. And not the potential for capital growth. Each property you buy
will be a stepping stone to the next one. And your experiences of
being both a landlord and investor will skyrocket. It makes sense, right? The more you purchase and hold, the more experiences you’ll gain. Recent research conducted
by UPAD has shown that two bedroom
properties for both houses and apartments bring in
the best rental yield. And I know from experience
that these types of properties are rented by key workers such as teachers, nurses, taxi drivers. Both white and blue collar workers. They don’t necessarily want
to buy their own property but want a nice place that
they can call their home. Okay so if you’re a first time investor, cheaper properties can really work for you for a number of reasons. Firstly, lending will be far easier. If you’re looking for
40,000 as opposed to 200,000 because when you start there will be fewer lenders available to you. Once you have some experience
with owning a rental property and operating as a
landlord, you will find that there will be more lenders that will be willing to do business with you. There’s a better chance
that you’ll be able to reduce your loans to value
to increase your cash flow. If you have 30,000 to invest for example and you use that as a depsosit
on a 120,000 property, you will need to mortgage with the loan to value of 75 percent. And you’ll find the interest
you pay on your mortgage will be higher then if
you used your 30,000 to purchase a 60,000 property and took out a mortgage with
a 50 percent loan to value. Less capital will be required but you’ll still gain experience of purchasing an investment, working with a mortgage
broker and a solicitor, and operating as a landlord. As if you bought a more expensive property in a city centre or different region. If you have a sizable amount to invest, but you’re not 100 percent sure if property is the right
asset class for you, then a cheaper property will allow you to dip your toe in the
water before you decide to go all in. Running costs will be cheaper and I’m talking about buildings insurance as well as mortgage repayments. And utility bills if you find yourself letting a property with bills included. Cheaper properties won’t
cost as much to fix compared to more expensive ones. You’ll gain experience of
solving and fixing problems and any mistakes you make
won’t be as costly compared to the bigger, more expensive properties. There’s also a good chance
that a cheaper rental will not be near where you live. Which will force you to look
for a good managing agent and then allow you to put
it in the back of your mind once it’s up and running so you can focus on your normal routine and enjoy the passive
income that it brings. Experience with working
with the letting agent is good to have in my opinion. I think that cheap rental
properties are a great way to start as a landlord and
shouldn’t be overlooked. Start as soon as possible, buy
cheap, gain some experience, and start to build your
empire and your legacy while providing a good
service to your customers. Over to you. Have you bought cheap property? Are you thinking of
buying a cheap property as your first investment? Let me know in the comments section below. And I’ll also be happy
to answer any questions you might have. Please like and share if
you found this video useful and definitely subscribe
if you haven’t already so you won’t miss my future videos which will all be geared
towards helping you start or improve your property business. Thank you so much for watching and I’ll see you in the next video. (upbeat music)

8 Comments

  • noskari2000

    Great content. I have watched most of your videos 🙂 Which areas are you looking to make your first purchase between 30-70k Have you now made this purchase? Many thanks

  • Kyle H

    I've been thinking about making this kind of investment for quite some time. My biggest worry is that my returns might be much better with less headache keeping everything in indexes. The other thing is that real estate in my area seems to be cheap only if it's absolutely terrible. I live near Detroit, so this usually means high crime rates, etc. Deals are very hard to come by.

  • Adi Day

    Useful video, thanks Andy. I bought a £70k flat 5 years ago. 2 tenants to date and a solid £5.4k revenue each year.

  • manchester youtube

    If I want to buy a house that is on the market for£45000 and I have 25% deposit could I get a mortgage for the remainder of approx 33k or won't be able to happen? Advise please

  • Jonathan Nicholls

    Hi Andy,

    Thank you for your insights, I will be dipping my toe in with a few cheap rentals shortly.

    Have you any advice on estimating renovation costs please?

    Thanks again.

    Jonny.

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